5 Must Read Books for Seasoned Investors
As experienced as you may be as an investor, one should consistently stay relevant by upgrading your knowledge. For those keen on challenging themselves or looking for new perspectives and insights, here are some book recommendations just for you.
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One Up On Wall Street: How to Use What You Already Know to Make Money in the Market
by Peter Lynch
As one of the most successful money managers, Lynch asserts that an average investor has the means to beat professionals. This book highlights that opportunities are abundant and prevalent in your everyday life, and that you simply have to pay attention to what you like in a field that you are good at to find a worthy company to invest in, even before the analysts. As ironic as it sounds, common knowledge and what you already know is very important. Take note of what surrounds you, be it in a nearby mall or your workplace, and derive your own insights from their business developments. The book also highlights the points that truly matter in a company’s financial statement.
To refresh your memory, Lynch also provides the guidelines for investing in cyclical, turnaround, and fast-growing companies to better help you pick a winning stock. While debatable, he promises a rewarding portfolio in the long run if you ignore the ups and downs of the market as well as speculation about interest rates.
This is a good refresher course so that you can be on your way to discovering a “tenbagger”- stocks that appreciate tenfold or more.
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A Random Walk Down Wall Street
by Burton Malkiel
This book provides intermediate level materials on how to choose stocks, exchange traded funds (ETFs), emerging market securities and build a balanced and diversified portfolio. As a whole, the author argues that you should not second guess the fair price for a stock due to the market’s hive mind.
As a seasoned investor, it comes as no surprise that stock prices sometimes seem random and is terribly tough to predict. Historical data is arguably not useful. If it was, everyone would have profited. If you are currently paying for your mutual fund manager, this book might convince you otherwise. In fact, according to records, most actively managed funds consistently fail to beat low-cost index funds.
Of course, the book also warns about the danger of being blind to risky market conditions. Gives a history lesson of speculative bubbles, starting from the very famous Dutch tulip bubble.
by Robert Shiller
A Nobel Prize winner, Shiller teaches you about social psychology and how to think in this book. Unlike the previous author, he argues that historical data is important if stock prices are efficient. Share price, for instance, will increase if investors anticipate that it will do well based on what happened in the past. Pessimism based on historical data can also result in investors seeking shelter in bonds. The book goes on to define a stock’s value by the profits the company will earn for investors.
Overall, the book seems to favour a long term outlook to smooth out market cycles. While short term fluctuations can be devastating, coping with it is a good form of mind training for stock owners. Interestingly, it was noted that whenever the price/earnings ratio is high, low returns tend to follow over the next decade.
If you’re interested in this book, you should also read our other article:
The Little Book That Beats the Market
by Joel Greenblatt
The book presents a formula for picking companies to realize approximately 30% annual returns: To invest in companies with high returns when they are sold at a large discount. Essentially, buy low, and sell high. The magic formula, tested for 17 years, is to buy around 20 to 30 of such companies, hold for a year, sell, and repeat. The guiding principle of this formula lies in value investing and quality criteria for stock selection.
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The 5 Mistakes Every Investor Makes and How To Avoid Them
by Peter Mallouk
As America’s top few independent financial advisors, Mallouk explains some of the most common mistakes that investors make. This entertaining and informative read advises you to be cautious about market timing and active trading. It likens the market to that of a typical casino in Vegas, highlighting that the house always wins. It also suggests means to help busy investors like you to choose a good financial planner while underscoring the risk of not being fooled by how well the planner markets himself. The truth is that a money manager with a lot of portfolios must definitely have one that outperformed the market.
Hopefully, these books will act as a good supplement on top of your daily newspapers and business reviews. Reading up on varying perspectives can help you gain fresh insights and better bullet proof your portfolio. Good luck!